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JOHOR BAHRU, Malaysia (Reuters) -- Malaysia's brazen software pirates are hawking the next version of Microsoft Corp's Windows operating system years before it is supposed to be on sale.

Underscoring the scale of U.S. companies' copyright problems in Asia, CDs containing software Microsoft has code named "Longhorn" are on sale for six ringgit ($1.58) in southern Malaysia.

Microsoft's current version of Windows, XP, sells for upwards of $100 in the United States.

The software is an early version of Longhorn demonstrated and distributed at a conference for Microsoft programmers in Los Angeles in October, Microsoft Corporate Attorney Jonathan Selvasegaram told Reuters.

"It's not a ready product," he said from Malaysia. "Even if it works for a while, I think it's very risky," to install on a home computer, he said.

Chairman Bill Gates has said Longhorn, which is not expected to be released before 2005, would rank as Microsoft's largest software launch this decade.

The software is on sale in the largest shopping complex in Johor Bahru, the Malaysian city bordering Singapore, alongside thousands of pirated programs, music CDs and DVDs.

Discs in plastic covers hang from racks in more than a dozen specialized stores in the Holiday Plaza center, even though it has its own police station.

Such piracy is rampant in Asia, although the United States praised Malaysia for seizing thousands of illegal discs since May.

U.S. trade losses due to piracy in Malaysia fell to $242 million last year from $316 million in 2001.

Selvasegaram said pirates would shut their shops whenever Malaysian authorities launched a clampdown, only to reopen within days or even hours.

He said software companies were working with the authorities on the problem, but the police were more concerned about controlling pornography.